Insurance settlements

Income received from an insurance settlement generally isn't subject to tax unless you paid to have the policy transferred to you. The interest paid when dividends are left with an insurance company, however, is reported to the taxpayer as interest and is taxable. Also, if you pay the entire cost of an accident or health plan, you don't need to include any amounts you receive from the plan as income on your tax return. Unfortunately, if your plan reimbursed you for medical expenses you deducted in an earlier year, you may be required to include some, or all, of the reimbursement amount as income on your next return. For more information on reporting income from insurance settlements, consult a tax advisor or call the toll-free number for Federal Tax Information and Assistance at 1-800-829-1040.